Net Profit Margin
Net profit margin is the percentage of total revenue that remains as profit after all expenses have been paid, including COGS, operating expenses, interest, and taxes. It is the bottom-line measure of how profitable your business truly is.
Types
Net Profit
Total revenue minus all expenses. If you earn $200,000 and spend $175,000 total, your net profit is $25,000.
Net Margin Percentage
Net profit divided by total revenue. $25,000 / $200,000 = 12.5% net margin.
Why it matters
Gross margin tells you how efficient your production is. Net margin tells you whether your entire business model is sustainable. A business with a high gross margin but low net margin is being eaten by overhead. Rent, admin, marketing, or management costs are simply too high relative to revenue.
Real-world example
A field service contractor generates $350,000 per year. After labor ($180,000), fuel and materials ($60,000), insurance ($15,000), and admin ($45,000), net profit is $50,000. Net margin is 14.3%, which is solid for a small contractor.
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